U.S. Solar Manufacturer Wants Tariffs On The Chinese As Punishment For Cyber-Attacks

Industrial espionage, punitive tariffs and trade wars — as the New York Times reported on Monday, they’re just the latest in the ongoing dispute between solar manufacturers in the U.S. and China.

SolarWorld Americas — the largest solar panel manufacturer in the U.S. — first brought its case to the Commerce Department in 2011, arguing that subsidies provided by the Chinese government were allowing manufacturers there to sell solar panels at unfairly low costs, threatening the finances of manufacturers in America. In May 2012, Commerce decided SolarWorld had a point, and began imposing steep tariffs — taxes on imports — on solar panels coming into America from China.

The Chinese responded in two ways. First, the manufacturers moved portions of their supply chains to countries like Taiwan to get around Commerce’s ruling, as the tariff only applied to the final assembly of the parts into the finished solar modules. And second, according to the Justice Department, several members of the Chinese military hacked their way into SolarWorld computers and stole crucial business documents.

The stolen documents “included cash-flow records indicating SolarWorld’s ability to survive financial strain, detailed information on proprietary technology and production costs and methods, as well as strategic discussions about the trade case with its lawyers” the Times reported.

Six American companies in all were targeted Chinese cyber-attack, and four of those companies have filed trade cases against state-sponsored industries in China. Many major companies in China are either owned by the government or heavily supported and subsidized by it — so efforts by the Chinese to further their military and intelligence interests, and efforts to further their economic interests, can be especially hard to distinguish.

For their part, the Chinese foreign and defense ministries have denied any wrongdoing, and also shot back that the United States is guilty of its own malfeasance, and pointed to the recent revelations by Edward Snowden of the extent of the international spying done by America’s National Security Agency.

“The problem for the United States is that it’s trying to promote this norm against industrial espionage — cybertheft of intellectual property — as distinct from traditional political or military espionage,” Adam Segal, a senior fellow for China studies, and the director of the digital and cyberspace policy program at the Council on Foreign Relations, told the Times. “It’s not an argument that many people bought even before Snowden, and now it’s even harder to make.”

The unpleasant irony here is that, by subsidizing its manufacturers, China is helping to provide the extremely cheap solar panels that have helped installations of solar power boomthroughout the world in recent years. In effect, Chinese taxpayers are covering part of the cost of manufacturing the solar panels, so that buyers throughout the rest of the world can get them for extra-low prices. That’s not good for solar manufacturers in the U.S. and elsewhere who have a hard time keeping up with their subsizied Chinese competitors. But it’s great for everyone else. Other U.S. companies, such as Sunrun and SolarCity, who focus on installing and maintaining solar systems on homes and businesses, are able to buy the cheap Chinese panels and then offer their U.S. customers a better deal. So even as American jobs are lost in solar manufacturing, other jobs are gained in installation and maintenance.

All of which is why some commentators have suggested the best U.S. response to China’s subsidies would be to simply say “thank you,” and enjoy the cheap solar prices. Others have advised negotiating a policy compromise through diplomatic channels, rather than relying on tariffs to penalize the Chinese, as the latter course could spark a trade war. In fact, the Chinese government retaliated against American tariffs at the start of 2014 by imposing its own high import duties on American shipments of polysilicon, a key component in solar panel construction.

More recently, China asked the U.S. government for a suspension of the tariffs, and for a chance to engage in talks. But movement on that option has not occurred yet. “Everyone’s just going back and forth, tit-for-tat, on this,” Scott Kennedy, director of the Research Center for Chinese Politics and Business at Indiana University, told the Times. “There needs to be some type of negotiation amongst all the parties and basically have a truce in the legal war and figure out what are the new rules of the game.”

SolarWorld, however, is calling on the U.S. government to impose another round of tariffs as punishment for the recent cyber-attacks. “We know we are one of many U.S. industries using the trade laws to challenge China’s illegal trade practices,” Mukesh Dulani, U.S. president of SolarWorld, told the Wall Street Journal. “Now we take hope that this criminal indictment is bringing the problem, particularly this brazen combination of spying and unfair trade, to the attention of the U.S. public and government as a whole.”

Officials at the Commerce Department are reviewing SolarWorld’s request, but it’s unclear if or how the agency and the White House will choose to respond.

SolarWorld also brought a new case at the start of 2014 to close the loophole the Chinese manufacturers used by moving to Taiwan, and the initial decisions by commerce have gone in the company’s favor — the U.S. began collecting a certain amount of amended tariffs this summer. Buyers here in the States are expecting a 7 to 20 percent hike in the price of solar modules as a result of the latest round of tariffs, but the trade case remains ongoing.